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9 Reasons I'd Never Invest in Annaly Capital Management, Inc.

I hate to be the bearer of bad news, but I feel I must. In my opinion, Annaly Capital Management (NYSE: NLY) should be avoided by all but the least risk-averse investors.

There are a number of reasons for this, but all of them coalesce around two issues. First, it's my opinion that Annaly's management has taken inexcusable liberties to enrich themselves at the expense of shareholders. Its recent decision to externalize the mortgage REIT's management to a private company wholly owned by said executives is just one of many examples.

And second, I believe the economic forces which allowed Annaly to outperform in the years following the financial crisis are over. The decades-long trend of declining interest rates has given way to a rebound in borrowing costs that will both increase Annaly's cost of funds and decrease the value of its portfolio of mortgage-backed securities.

In short, it seems to me that Annaly's best days are almost certainly in the rearview mirror. It's with this in mind, in turn, that I decided to lay out the nine biggest reasons I'd never buy shares in the high-yielding mortgage REIT. To see the complete list, simply scroll through the presentation below.

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Comments from our Foolish Readers

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What's to say. A couple of days ago you were pushing tNLY. Now you are giving so called reasons not to buy it. It makes everything else you say suspect. Thanks to you all those poor souls that took your advice and bought NLY a couple of days ago are now loosing money because you bad mouthed it today. What a bunch of fakes!

What can I say? You suggested NLY was maybe a good by a couple of days ago. Now it's not worth looking at. It doesn't say much for your stock information, and clearly hurts all those poor souls that bought on your information a couple of days ago. In my book you guys are a bunch of quacks and fakes.

As you've noticed, we don't have a uniform position on NLY (or any other stock). In fact, I'm one of the few that's staunchly in the bearish camp, if you will, when it comes to NLY.

The reason for the lack of uniformity in opinions is simply because we have a lot of writers and analysts who don't think alike. While I know that can be frustrating at times for the reader, I think it speaks to our efforts at intellectual honesty and independence.

With respect to my position on NLY, I believe the objective evidence (presented in the slideshow here and in former articles of mine) speaks for itself.

Your comments about Chimera are misleading, which is typical of Motley Fool posts. You either don't understand what is going on or you are intentionally misleading readers to try to convince them to buy your publications. Chimera did have an accounting debacle, but it was solely about non-cash charges in a very confusing environment. There was no impact on book value or cash flow. Billionaire Leon Cooperman, who has a superb track record, owns over 7% of Chimera and recently upped his stake. he also filed a 13D, which means he is working cooperatively with management. Cooperman's ethics are above reproach.

Spot on about the cronyism and nepotism. How is it that the "core group" can earn insane salaries at the ages of 25 yrs old hence by shuffling paper spread trades while the back office workers barely get minimum wage? In a company of less than 40 employees. I heard of workers coming in till almost midnight and on weekends for a $60,000 salary and a 13th check bonus. Also some "core group" management hastily left the company this year?

Shenanigans!This is precisely what is wrong with Wall Street. When a company like this can make insane amounts of money guaranteed by our governments departments like Fannie and Freddy. Big house of cards.